On Wednesday, April 3, the U.S. Securities and Exchange Commission (SEC) has published long-awaited cryptocurrency regulation guidelines. In a statement titled “Framework for ‘Investment Contract’ Analysis of Digital Assets”, SEC officials noted that depending on how crypto token is offered and sold as well as the nature of the crypto asset, including what rights it purports to convey, digital asset may fall within the definition of a security under the U.S. federal securities laws.
The U.S. Securities and Exchange Commission praised blockchain technology saying, “Blockchain and distributed ledger technology can catalyze a wide range of innovation.” SEC statement continued, “We have seen these technologies used to create financial instruments, sometimes in the form of tokens or coins that can provide investment opportunities like those offered through more traditional forms of securities.”
To assist crypto asset companies and investors seeking to comply with the U.S. federal securities laws, Securities and Exchange Commission officials announced a new framework for analyzing whether a digital currency is offered and sold as an investment contract, and, therefore, is a security.
“The framework is not intended to be an exhaustive overview of the law, but rather, an analytical tool to help market participants assess whether the federal securities laws apply to the offer, sale, or resale of a particular digital asset,” the commission said.
The S.E.C. also announced the issuance of a response to a no-action request, confirming that, “the Division will not recommend enforcement action to the Commission if the digital asset described in the request is offered or sold without registration under the U.S. federal securities laws.”
But Commission officials warned, that market participants should be aware that they may be conducting activities that fall within S.E.C. jurisdiction.
“Market participants may engage in activities that require registration of transactions and persons or entities involved in those transactions. Even if no registration is required, activities involving digital assets that are securities may still be subject to the Commission’s regulation and oversight,” reads the statement.
The S.E.C. also noted that “Investment Contract Analysis of Digital Assets” framework is not legally binding and the Commission has neither approved nor disapproved its content.
“This framework, like other Staff guidance, is not binding on the Divisions or the Commission. It does not constitute legal advice, for which you should consult with your own attorney. It does not modify or replace any existing applicable laws, regulations, or rules,” the Commission said in a statement published on its website.